Sustainability rating for insurance companies: less than 25% recommended

Source: Oekom, 24 March 2003

The Norwegian insurance company Storebrand has come out top in a sustainability assessment of the insurance sector carried out by Munich-based rating agency oekom research. Storebrand beat 69 competitors for the top place in oekom’s Corporate Responsibility Rating, a sustainability rating based on 200 environmental and social criteria. The Norwegian company scored a "B" on a scale of A+ to D-. Another 15 insurance companies were assessed as having sustainability performance well above average in an international comparison by oekom research. Over 15 sustainably managed funds with a total volume of more than 750 million Euros are using oekom’s ratings in making investment decisions.
The world’s 70 biggest insurance players were under the microscope in the Corporate Responsibility Rating process. At the pre-selection stage, oekom research identified 44 companies as not even qualifying for detailed analysis because of inadequate transparency. This group included all 26 US companies covered by the survey, alongside European companies such as Holland’s AEGON and Italy’s Assicurazioni Generali. The 26 insurance companies that got through this first stage were then subjected to a wide-ranging corporate responsibility assessment process. Storebrand stood out because of its attention to sustainability issues across the complete spectrum of its business activities. Factors in Storebrand’s top rating included its well-developed environmental programs, its high social standards for its workers and the equal opportunities policy it puts into practice.

A number of key sustainability issues present challenges for the insurance sector. For example, genetic testing by insurance companies has repeatedly given rise to public concern on ethical grounds. Johannes Nikolopoulos, an oekom research analyst, said, "The sector has reacted to this challenge and in nearly all countries insurers have voluntarily agreed not to use genetic testing for standard life assurance policies. This has defused the debate around genetic testing and has to some extent blunted criticisms that people with hereditary conditions may be discriminated against."

Another key area is credit support for socially and environmentally controversial projects. Only a few of the companies assessed carried out a full analysis of the impact of construction projects such as dams or pipelines. Swiss Re was among the companies that did. The Swiss reinsurer has set up a department for social and cultural issues, thus going far beyond the OECD Guidelines for Multinational Enterprises.

On the environmental side, the impact of climate change is a highly charged issue. The insurance sector has so far failed to pay sufficient attention to this phenomenon. "Reinsurers are an important exception to this trend, along with prime insurers such as Gerling, who are notable for their research effort and political lobbying work in the field of climate change", commented Nikolopoulos.

There is scope for the insurance sector to make more of its potential role as a catalyst in the shift towards a sustainable economy by offering "green" insurance products. But at present such products are still rare. Apart from now standard products such as low-mileage premiums for motor vehicle insurance and environmental liability policies, the insurance sector has yet to demonstrate much innovation in this field.

The situation is more encouraging when it comes to asset management, where the number of sustainable investment products is constantly on the increase. This was an area where Storebrand excelled because of its high proportion of sustainably managed funds. Over 10% of its total asset portfolio take environmental and social issues into account, and this proportion rises to 50% for shares. Aviva deserves a special mention for its efforts, through its British subsidiary Morley Fund Management, to actively influence the business policy of companies it invests in. This policy, known as shareholder advocacy, is intended to encourage companies to do business in a more sustainable way.

The growing importance of sustainability is apparent not only from the increasing volume of sustainable investment products. Stefan Zanetti is head of the sustainability network at Basle-based insurance company Basler Versicherungen, which was ranked fifth in oekom research’s rating. "Professional sustainability rating is becoming ever more important for us as an insurance company. Not only does it give us feedback on our performance from sustainability experts, but selected rating agencies like oekom research also give us an indication of the direction the sustainability debate is taking within companies," explained Zanetti.

70 companies were analysed in the present Corporate Responsibility Rating:

Aflac (US)
Alleanza Assicurazioni (IT)
Allianz Group (DE)
Allmerica Financial (US)
Allstate (US)
AMB Generali Holding (DE)
American International Group (US)
Aon (US)
Assicurazioni Generali (IT)
Aviva (UK)
AXA Group (FR)
Bâloise-Holding (CH)
Berkshire Hathaway (US)
Britannic Group (UK)
Canada Life Financial (CA)
Chubb (US)
Cigna (US)
Cincinnati Financial (US)
Conseco (US)
Everest Re Group (US)
Fairfax Financial Holdings (CA)
Fortis (NL)
Gerling Group (DE)
Hannover Re (DE)
Hartford Financial Services (US)
Helvetia Patria (CH)
Insurance Australia Group (AU)
Irish Life & Permanent (IE)
Jefferson-Pilot (US)
John Hancock Financial Services (US)
La Fondiaria Assicurazioni (IT)
Legal & General Group (UK)
Lincoln National (US)
Manulife Financial (CA)
Mapfre (ES)
Marsh & McLennan (US)
Mediolanum (IT)
MetLife (US)
MGIC Investment (US)
Millea Holdings (JP)
Mitsui Sumitomo Insurance (JP)
Munich Re Group (DE)
Old Mutual (UK)
PMI Group (US)
Pohjola (FI)
Progressive (US)
Protective Life (US)
Prudential (UK)
Prudential Financial (US)
QBE Insurance Group (AU)
Royal & SunAlliance (UK)
Safeco (US)
Sampo (FI)
Skandia (SE)
Sompo Japan Insurance (JP)
St. Paul Companies (US)
Storebrand (NO)
Sun Life Financial (CA)
Swiss Life (CH)
Swiss Re (CH)
Topdanmark (DK)
Torchmark (US)
Tower (NZ)
UnumProvident (US)
XL Capital (BM)
Zurich Financial Services Group (CH)